Jobs for Resilience Report

Context:

The World Bank’s ‘South Asia Regional Update: Jobs for Resilience report’ raises concerns over the South Asia region, including India, failing to capitalize on its demographic dividend. Despite projecting a robust growth rate of 6.0-6.1% for 2024-25, the report indicates that the pace of job creation in the region is insufficient compared to the growth in the working-age population. This mismatch suggests a missed opportunity to fully leverage the potential economic benefits of a youthful and growing workforce in South Asia.

Relevance:

GS III: Indian Economy

Dimensions of the Article:

1. Key Highlights from the Jobs for Resilience Report
2. Risks Highlighted in the Report
3. Case of India
4. Way Ahead Suggested in the Jobs for Resilience Report for India

Key Highlights from the Jobs for Resilience Report:

Economic Growth:

• South Asia’s output growth is projected at 6.0-6.1% for 2024-25, surpassing other emerging markets and developing economies (EMDE).
• Strong growth is primarily driven by India, while growth in the rest of the region remains below pre-pandemic levels.
• The public sector is the main growth driver in South Asia, with weak private investment.

Vulnerabilities and Risks:

• Despite growth, South Asia faces underlying vulnerabilities leading to potential downside risks.
• Private investment growth has slowed significantly across all South Asian countries, hindering development and climate goals.
• South Asia’s fiscal limitations constrain public policies for climate change adaptation.
  • This results in increased burdens on firms, farmers, and vulnerable households due to climate shocks.

Labour Market:

• South Asia’s labour market challenges are notable among EMDEs.
• Employment ratios are declining, and there’s a low share of women in employment.
• The agriculture sector has reduced labour, while non-agriculture sectors struggle to create jobs.
• Challenges in the economic and institutional environments have restrained firm growth.
• The region’s output growth is now heavily reliant on labour productivity and population growth, both of which are decelerating.

Risks Highlighted in the Report:

Debt and Fiscal Deficits:

• Efforts to reduce debt, borrowing costs, and fiscal deficits might constrain growth and limit responses to climate-related shocks.

Climate Adaptation:

• Providing public goods is crucial for effective climate adaptation.
• Households and farms, especially those shifting to non-agricultural jobs, benefit significantly from these public goods.
• Limited opportunities to shift from agriculture make certain adaptation strategies less effective.

Employment Trends:

• Employment challenges are more pronounced in non-agricultural sectors.
• Despite a growing working-age population, employment growth lags, preventing the region from fully utilizing its demographic potential.
• South Asia’s output growth could increase by 16% if its employment rate matched that of other EMDEs.

Case of India:

Employment Growth:

• From 2000 to 2023, India’s employment growth lagged behind its working-age population growth.
• India witnessed a significant decline in its employment ratio up to 2022, second only to Nepal in the region.
• Preliminary data for 2023 showed a 3-percentage point improvement, partially offsetting the previous decline.

Economic Growth:

• With an expected robust growth rate of 7.5% in FY23/24, India is a key driver of the strong economic performance in the South Asian region, alongside recoveries in Sri Lanka and Pakistan.

Way Ahead Suggested in the Jobs for Resilience Report for India:

Boosting Growth and Investment:

• Emphasize stronger job creation and relax financial market restrictions to enhance growth, private investment, and government revenues.

Conditions for Investment:

• Private investment is likely to increase when there’s strong institutional quality, competitive real exchange rate, and openness to trade and capital flows.

Effective Adaptation Strategies:

• Publicly supported adaptations are generally more effective.
• Policy guidance should focus on:
  • Implementing comprehensive policy packages.
  • Prioritizing policies with dual benefits.
  • Designing policies that don’t compromise climate goals while achieving other objectives.

Sustaining Growth and Employment:

• Increase employment ratios, particularly in non-agricultural sectors and among women, by:
  • Removing growth impediments for businesses.
  • Enhancing openness to international trade.
  • Relaxing labour and product market restrictions.
  • Investing in human capital.
  • Promoting equality and women’s rights.

-Source: Down To Earth